2008 (5) TMI 33 - AT - Service Tax

Security Agency service - failure to pay the tax - Commissioner (Appeals) upheld penalty u/s 77 but imposed penalty u/s 76 & 78 by modifying the OIO - appellant was under bonafide belief that it was liable to pay Service Tax only on receipt of the amount from the recipient impugned order of commissioner (A) is modified further held that penalty of Rs.1 lac u/s 76 and Rs.1,000 u/s 77 are justified but penalty u/s 78 is not justified - appeal stands allowed partly

Summary

Issues:
- Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
- Applicability of Section 80 for waiver of penalties.
- Justification for penalties imposed on the appellant.
- Discrepancies in penalty quantification under different sections.

Analysis:
1. Imposition of Penalties: The appellant, engaged in providing "Security Agency" service, failed to pay Service Tax amounting to Rs. 9,41,799/- for services provided to M/s B.S.N.L. Penalties were imposed under Sections 76, 77, and 78 of the Finance Act, 1994, by the Commissioner (Appeals). The penalties totaled Rs. 9,41,799/- under Sections 76 and 78 each, and Rs. 1,000/- under Section 77. The penalties were upheld despite the tax being paid, as penalties were imposed due to non-payment, suppression of facts, and failure to file returns.

2. Applicability of Section 80: The appellant argued for the condonation of penalties under Section 80, citing lack of awareness regarding Service Tax obligations and the subsequent payment of dues by M/s B.S.N.L. after a court order. However, the Tribunal found that the appellant's lack of awareness was not a reasonable cause for failure to pay taxes. The Tribunal emphasized that penalties could not be waived solely based on the appellant's claim of ignorance.

3. Justification for Penalties: The Tribunal analyzed the penalties imposed under Sections 76, 77, and 78. While penalties under Sections 76 and 77 were deemed justified, the Tribunal found no grounds for penalty under Section 78. The Tribunal clarified that non-submission of returns did not necessarily constitute suppression of facts under Section 78, and penalties under this section were not applicable in the appellant's case.

4. Discrepancies in Penalty Quantification: The Tribunal reviewed the quantification of penalties under Section 76, noting that penalties could be imposed at the discretion of authorities. Despite the prescribed rates in the Act, authorities had the flexibility to impose lesser penalties based on the circumstances of each case. The Tribunal, considering the appellant's circumstances and actions, reduced the penalty under Section 76 to Rs. 1 lac in total for the periods in question, finding this amount sufficient to fulfill penal obligations.

In conclusion, the Tribunal modified the order, reducing the penalties to Rs. 1 lac under Section 76, Rs. 1,000 under Section 77, and absolving the appellant from penalty under Section 78. The appeal was partly allowed based on the revised penalty amounts determined by the Tribunal.